I am very excited to say that the second renovation phase of RP#3 has finally begun!!! In this post, I will go through the nuts and bolts of the renovation and the deal itself.

Property specs

I have bought this property more than one year ago, but at the time I only renovated part of it. This property has 6 different units and I only renovated two of them when I bought it. I rented out those two units quite fast, for a total of €515/mo, which eventually became €500/mo as some problems popped up in one of the units and I decided to lower the rent to keep the tenants happy.

You may recall that the cost of that renovation was largely undercalculated, and I ended up spending way more money than I anticipated at first. The first renovation covered two units and one common area inside the building.

The building is divided into two parts, each of which contains 3 units:

Sketch of my 6-unit building.

After the renovation, I decided to put off the renovation of the second half – or right half, in the figure above – of the building (and I actually ended up renting out one of the units as it was (LINK)). The main reason was to preserve liquidity. Now, that my real estate company did well, I decided to cash out some monies and go ahead with the renovation on the second half of the building. This second half is promised to be rented out to the sub-leasing company I work with, for €540/mo, which will be instrumental for me to hit €2,000/mo until the end of the year.

Renovation Costs

First, the costs:

Labor: €24,000.00 (this includes renovating the facade, the electric part, plumbing and all the material for the walls and ceilings);

Tiles, tubs, taps, vanities and what not: about €4,000.00;

Kitchen cabinets and countertops: about€3,300.00;

Windows and outdoors: about €2,000.00;

Total: about €33,300.

To pay for this renovation, I will withdraw as many funds from my RE company as possible. At first, I thought I could cash out €30,000, but due to the amount of taxes I will pay to do this, I will only be able to cash out around half of that (unless we have big sales until the end of the year). I am also relying on a €2,500 work bonus that I will collect by Christmas. At the end of it, I will have no money in the bank, which means that I will feel comfortable – remember, if you have money sitting the bank something’s wrong! 🙂

The deal

This is a building in the very center of a mid-east city in Portugal, with a very big and reputable university. The building is also relatively close to the university, so renting it out will be easy in the long run. Just to let you know, I wrote a post entirely on this unit a while back ago.

How much I spent so far

This has been my biggest deal so far, if we account for renovation costs. I have bought RP#3 for €31,500 but I was 100% financed. Here’s the rest of the costs I’ve had with this property so far:

Closing costs summed up to €3,900. These were especially high, as closing costs in Portugal tend to be lower, especially if you’re 100% financed.

Given that I will invest another €33,300 into this renovation, at the end of it, I will have €65,500 invested, and I will have a mortgage of €31,000.

Yield

As this property will safely yield €1,260 in December, we’re talking about a 23% cash on cash return and a 16% yield. I am not sure about you, but this looks like a great investment to me!

As I will write off the expenses with the renovation of the property, I will get, at least, 2 years of tax-free rental income on this property. This means that the 16% yield will be net. Well, to be fair, we need to deduct the property taxes and the insurance (together that is something like €500/yr). Therefore, the net yield is 15,15%. Still awesome, right?

Next year I will pocket €14,520 after all the renovations. I will get a line of credit on this property, of about 175k. On a 3%, 13-year credit line like this, I will pay €1,220 every month, which is essentially the rental income of the property. Note that, in the first year, €837 of the €1,220 is principle. After this, it allows me to have about 150k to go out for shopping. 🙂

Aspects of the renovation

I didn’t want to show much of the building online, but here it goes a little bit of unit. This is the lower unit of the right side of the building, which we just guttered:

As well as part of the 4th unit in the picture above:

We are still working on guttering it, actually, as we simply torn some walls down up until now. As you can see, they seem like a very small 1-bedroom (which in fact they are) that you would typically rent out to one student.

I have actually decided to start by tearing down the walls of every unit, so that we can plan the several rooms in a better way.

Last week I decided to list two of my properties: Rental Property #1 and Rental Property #2. I want to keep you posted regarding why I did this.

Rental Property 1 – my first rental ever!

First, RP#1. I moved to this property this month, and I love living in it. My tenants left the property in a perfect shape (pretty much how I handed it to them) and it looks lovely. Here is the data as of today:

Acquisition cost and remodeling = €31,500.

Balance on the property (deducting net rents) = €28,000.

Current property value = about €50,000.

Listing price = €54,000.

Commission to sell = €5,000 + VAT = €6,150.

This means that if I sell at market value (€50,000) and I have to pay a 5k+VAT commission, I will end up with €43,850. From this, I gotta pay 28% on capital gains. This property VPT is almost €40,000, so there is no actual profit until €40k. If I sell for €50k, I can write off the 5k+VAT commission and therefore end up with a taxable capital gain of about 4k. From this, I can write off about 1k in expenses, including property transfer taxes (when I bought it). This means that the final taxable capital gain is about 3k and I need to pay 28% of that, which is about €850.

So, if I do sell for €50,000, I end up with €43,000. The Real Estate agent (I’ll explain in a bit why I am not selling this property through my own company), however, told me we may sell for €52k or even €53k. This sweetens the numbers up. In the worst case scenario, though, I will end up with a net profit of about €15,000 on this property. Not bad for a €31,500 – I’ll end up very close to a 50% cash on cash return!

Why sell?

…especially if I just moved in? I realized that with this kind of money, I can buy another property for myself (hopefully a 2-unit property, so that I live in one and rent the other out), remodeling it, and put €10k to work! This stroke me when I recently found a very nice condo for less than €20,000. I am not sure yet where I would put the €10,000 to work, but I’d probably split them between P2P, bonds, and stocks (a third each). More than the €10,000, I am particularly eager to buy a 2-unit property. This is the last proof that I have an investing-tailored mind: even my primary home has to return something financially.

Rental Property 2 – a great buy and hold

OK, RP#2 is a totally different ball game. When I mentioned the agent that I wanted to sell RP#1, he told me “don’t you want to sell RP#2 too? I may have a buyer for around €80k”.

RP#2 is one the best deals of my life. It generates almost €6,200 per year, and generates extra cash after I pay the mortgage off. Plus, it is a nice 3-unit property that I bought for less than €40,000. Because I got a mortgage on this property, I only had to put in about €9,000 so far (because I pre-payed 3k of the mortgage!), and I’ve collected about €6,500.

If I sell for €80k, I need to pay a €5,000 + VAT commission, which leaves me with €73,850. Then, I need to pay the mortgage off (currently at €34,500 with a 2% pre-payment penalty). This leaves me with €73,850 – €35,200 = €38,650. I also need to pay high capital gains, because I only have tax-free gains up to €64,000. This leaves me with a taxable tax gain of about €10,000, from which I can only write off about €1,000. On the €9,000 I need to pay about €2,500 on property taxes. So, at the end, selling for €80,000, I’ll end up with about €36,000, with is a 400% cash on cash return. Selling for €75,000 calculates into great numbers still, so I do hope this deal goes through.

I am not yet sure what I will do with the €30k+ that I will net from this property, should I sell it. Most likely, I will find a fix and flip deal and put the money to work there, or find another buy and hold that I buy with this money exclusively. I don’t mind making about €250/mo (vs €500+ I am making with this property), if I lower my liabilities (before the bank) AND I go after a deep value deal (meaning I buy for €30k+ but the property is worth at least €45k+). Ideally, I want to put the money to work fast and extract a high return until the end of the year.

Changing strategy?

As a buy and hold preacher, am I changing my strategy? No. I simply acknowledged that I can make quick money this way, and I believe that in the long run, I will achieve higher volumes of rent this way.

Why not selling through my company?

If I have a RE company, why not selling these properties through my own company? RP#1 is not adequate – I only have investors as buyers and RP#2 may fall short in terms of ROI. Note that if I sell for €80,000, that will mean a gross annual return of less than 8%. After taxes and property taxes that may mean about 4,5%.Also, this is an old property and renovation may be needed at any time.

To investors that look for our company, we usually propose properties that can are distressed and needed to be entirely rehabbed or properties that expectantly won’t need much maintenance over the next years. This property can actually be attractive before the local market, for investors that are happy with moderate returns. At the same time, I don’t lose anything to list it – there are absolutely no costs and it will continue to be rented in the next years.

Living frugally is probably the number one thing to look at for those who want to retire early. We already know the formula: earn well, live frugally (aka save as much as you can) and invest wisely. Write down a plan and follow it no matter what. But what about the details of frugal living? How to get through them, become financially independent and still live happily?

Living frugally – the 1st pillar of early retirement

In this post, I’ll tell you that living frugally actually means and how I do it.

What exactly do I save on?

If you stop to think about them, our culture is geared towards spending money. We are constantly bombarded with ads that prompt us to buy. We end up buying a lot of things by impulse, not because we really want them or need them.

I’ve decided to do it differently. I spend money on what I need the most, or what leaves me truly happy. You have to ask yourself the same question: what does leave you truly happy: a new car, a new smartphone, new clothes very season or being able to retire early? I am not saying that the latter is the right choice, I am simply saying that it is what I want. In the following, let me share some tips:

Home and car

As I wrote last week, I am moving to a very small condo in one of my multi-unit properties. I think I haven’t shown my car yet, so here is it:

Although a beautiful, reliable VW from 1999, it only cost me €3000. My family was quite surprised when I bought “such an old car” for “someone with a PhD and a large salary”. Guess what, I could not regret it less. I absolutely love my car. 🙂

This car serves me extremely well. First, it is a classic over here. Second, it is super reliable. Third, it has a huge trunk and can take up to 5 people. No other car would make out my happiness, really. Well, to be fully honest, a brand new Mercedes A45 would probably make me a little bit happier, but it would cost me €27000 more. €27000 is what I need to live comfortably for 2,5 years, so choosing between these cars having in mind that the Passat will allow me to retire at least 2,5 years before is a no brainer, even from the happiness point of view.

Food

Pretty simple – I never ever throw away food. I plan every meal accordingly and I buy food for them – not more, and rarely less.

Coupons

I’ve been less of a coupon freak. Back in the day, I use to literally go through every coupon magazine and collect tons of coupons, filter them out, and spend them or change them for money. I was a coupon machine. Today, my time is way more valuable than that. If you have spare time and you get bored easily, do search for coupons, they can save you a lot of money.

Today, I still chase coupons and try to take advantage of sales, but I am not a coupon freak anymore. I think that the time I would invest into finding coupons is way better invested in my online and Real Estate businesses and this blog. Plus, having a growing blog does leave me happier than saving a few bucks at the supermarket.

Family

Pretty difficult to deal with, I gotta be honest. My family does not understand why I want to be so frugal. If you hold a PhD and your family think you have a large salary, they won’t understand why you don’t want to go out for lunch or take advantage of Black Fridays. My family knows that I have CFS but they don’t really know I want to retire in my 30s. Plus, they don’t have a very frugal background, so frugality is not something they are really used to.

Gifts

This is the hardest part of saving. I use to give my relatives and friends pretty generous gifts, and ever since I started to work on my early retirement, I changed that. It is not exactly like I give them crappy presents now, but I try to go for something cheap that either they really need or looks expensive. For women, I tend to give flowers more often.

The first question that everyone who wants to retire early should make. It is also one of the first questions that I analyze with my clients… How much square footage (or square meters, if you’re European) do you really need?

I’ll try to answer it from a not so explored angle…

How much square footage do I need to live the good life

Most people fantasize about a huge home (and a nice car). This is in fact what trapps them into a mortgage that they need to work their entire lifes to pay off.

However, if you are asking yourself how much square footage you need, you’ve probably arrived at the conclusion that a small home is a smart decision…

So, this month I moved to my new home. My net worth is about a quarter of a million dollars, but as always, I like to look at spending money based on the amount of happiness it brings me. If having lunch out will boost my happiness on that particular day, you bet I am going to go grab that 10 buck lunch!

This follows my philosophy that you should spend your money based on the amount of happiness it will bring you. ALWAYS make that question before spending any money. “Do I really want to drink an espresso right now, or is this rather an impulse buy?” “Does having lunch out today will make me happier and more productive?” “What will make me happier? A big home and a big mortgage or financial comfort and a passive check in my mailbox?”

Think about life as a game, where characters have those fancy “happiness bars” on top of their heads. Something like this:

OK, these are what I am talking about. Imagine those next to you. You’re in the game now – you’re the main character and you’re trying to maximize your happiness. If you look to the other side, you’ll see a number, that is your money. Now go out there and try to get the best case scenario: spending as less money as possible, you want to maximize your happiness bar. Note that in this game you don’t have to impress people you don’t like. Stop now. Ask yourself. What is my perfect home now?

Chances are you’ll say you don’t need a big home because there is a sqft where your happiness levels actually start to decrease. Instead, you’ll trade a few square feet for a few (a few != many) other things, including a nice chesterfield where you can relax and a fast internet connection to read From Cents To Retirement or any other nice site out there (although you know that this is the best). You’ll probably buy plants or something that connects you to nature because we are naturally connected to nature. Or maybe you’re a city guy and nature doesn’t turn you on. Maybe an espresso machine and a shelf of books (this is sooo Ben Davis).

Today, I want to bring you something I’ve been working on and I am really excited about! I decided that I will try a certain technique for 30/60/90 days, and I will report the results on the blog. I will cover pretty much everything, from money to personal development. For the most part, I will cover health and personal development techniques, though. This will go hand in hand with my new diet, which I expect to maintain throughout the year.

I will try to report everything in a scientific matter (or at least, as much as possible). I will try to record every single time I apply the technique and on what day. Then, I will report the results. Some techniques may produce results after 30 days. Some may only work after 60 or even 90 days. Either way, I will report after 30 complete days of a given technique. Every time I report the 30-90 day experiment and the results, I explain thoroughly why I decided to do it and the meaning of the technique.

Here’s a few things that I am eager to test:

#1: 30-90 days of Deep meditation

I have been meditating for a while, but it is easy to forget about it. Honestly, on most days, I feel I didn’t have time for anything I wanted to do (and I could only do what I had to do). I want to meditate for at least 15 minutes in the morning and 15 minutes before going to sleep, for 30 days, and assess the results.

#2: 30-90 days of Visualization

Visualization is a very powerful tool that, put roughly, takes advantage of the fact that the brain cannot distinguish between what we are thinking of and what is in fact happening. Logically, if you accept that bad thoughts affect your overall health, then we could use visualization to affect our health in a positive way. That is what I want to do. This is the best video on visualization I ever saw:

the most important part of visualization is focusing on the feeling that you experience when visualizing.

#3: 30-90 days going to bed before 11.30

I will use the time until 00 to meditate and visualize and get to sleep at midnight or even before. The crucial thing is to be on my bed at 11.30, the latest. Ideally, I will try to be there at 11 and use 30 minutes to meditate and visualize.

#4: 30-90 days on Ginseng every single day, twice a day

Ginseng is known to be an excellent adaptogen, which helps with memory and fatigue. I’ve personally used Ginseng with great success, but I will report on it again. I personally like Ginseng from Now Foods as I said many times before.

#6: 30-90 days being super kind to others

…almost to the point where they think it’s fishy, I don’t care. Many people have told me that this works beautifully in making friends and having others being kind to you. You remember the commercial with that guy who waves to those who are pissed and insulting him? That is also part of the experiment. I simply want to check what result this will have on me.

#7: 30-90 days acknowledging and complimenting others

Same thing as #6.

#8: 30-90 days with irreprehensible posture

Living is learning and I am always trying to learn more and more. I recently learned that your posture affects your spine’s health, which in turn affects your well being. I wonder how much this could affect my personal situation. To maintain a really good posture, I will use a posture vest and remember myself every single day to sit straight at the computer – if I dominate that, I will pretty much be on a correct posture 95% of the time.

In this context, this is a pretty good exercise you can do at the gym:

#9: 30-90 days forcing myself to feel

Feel the smells, the air against my skin, the water falling on my body (in the shower), the sensation of success, etc.

In this context, I’ve found 5 things I can do right away to improve and harnessing the power of feeling good now. This challenge is tightly connected with other challenges (#1, #2 and #5) and they all boil down to having the part of our brain that experiences the best pleasures and emotions turned on.

#10: 30-90 days forcing myself to relax

Very connected to #9, and yet a heck of a different one… We live life so up close that it is super hard to appreciate the small moments. When I sit on my couch I do not feel that I am relaxing, yet I am. Feeling the relaxation – noticing it and letting it go through your body – is key! At least I suspect it is. Let me do 30 days of this and report the result back to you!

#11: 30-90 days going for a walk every day, for at least 10 minutes

Just forget about the routine, problems, and simply go for a walk (and enjoy it). I suspect this will free my mind, get my muscles to work and have a positive effect on my day. I am only able to do this during the Summertime (which in Portugal is pretty much 9 months in the year) LINK MISSING, but I am super curious to assess the results.

#12: 30-90 days without Facebook

Being constantly on is clearly preventing my body from relaxing. Facebook is a big part of that – although certainly not the only on. Maybe I will actually cut everything all along, including Whatsapp and other social media I use. As a hard-work blogger, I also check google analytics quite often (and Amazon affiliate/book fees), and I think that I will also refrain myself from checking those.

#13: 30-90 days without coffee

I love coffee. I absolutely love it. A good Italian or Portuguese espresso (which mean great Cameroon’s or Bolivian coffee) is certainly one of the most enjoyable parts of my day.

Coffee has a myriad of health benefits, in case you don’t know. However, coffee worsens my dizziness and therefore I would like to try out a period without any coffee whatsoever and assess the results.

#14: 30-90 days without chocolate

Actually, this is almost part of my new diet, but I want to completely remove chocolate for 30-90 days and assess the results.

Chocolate is another big pleasure that I have, but something I tend to overuse. I typically buy 70-95% cacao chocolate bars (meaning with as little sugar as possible) but this is still something I’d like to use less and less. Usually, raw cacao is preferred over any form of processed cacao for health benefits.

I figured that starting with 30-day chocolate periods is the best start to eventually eat less and less of it.

Lately, I’ve been having some trouble losing weight and I think I am overeating chocolate (really one of my favorite things to eat). Let’s see what comes out.

#15: 30-90 days focusing on others

Someone told me that the best way to feel better – especially if you have a health problem that is tightly connected to your emotions – is to focus on others. This topic has actually gotten quite popular on Quora.

I must admit that I am really going through some of the worse periods of my life. I feel quite sick and dizzy for more of the day, which are two symptoms of CFS. However, I know that this is a tight connection with my emotional status. In fact, I tend to think too much about my problem and I often have thoughts of “this is my worst phase ever” or “I will never be healthy”. Focusing on others (probably together with visualization) may be a good way to flip the switch, and I am willing to give it a shot.

#16: 30-90 days stretching every day after waking up and before going to bed

#17: 30-90 days drinking 1 gallon of water every single day

If one gallon of water is too much or ideal, no one knows. What I know is that, back in the day, I’d drink close to a gallon a day and feel great, so I will give it a shot. If you think about drinking one gallon a day yourself, consider that a few things may happen in the transition.

#18: 30-90 days doing acupressure every single day, especially before going to bed

I am not a big tea lover, I must confess. Coffee turns me on way more. However, I know that tea is a healthier alternative and can be used very effectively to treat anxiety and dizziness. I will pretty much drink chamomile and ginger tea in this experiment.

#20: 30-90 days preparing each day the night before

I think that the main point for me is that I won’t be anxious to make a break or something similar to that. I will be in control and know what I am supposed to do. I am curious to see how well this will work for me.

The goal of this experiment is quite intuitive, right? If something produces results in 30-90 days, then it will have a heck of a result if we apply it throughout my life. And habits compound too! We’re creatures of habit and I honestly feel I work better if I follow a specific routine. I will test out all these and adopt those that work better.

Let me know in the comments down below if you have any suggestions on what to try out!

This month I am moving to Portugal (most likely for good). This will change my daily life entirely, and I am finally moving to a country I love to live in, and leaving one that I don’t like that much. Exciting times ahead… after all, I live where you vacation from now on!

I have posted on how crazy beautiful the country is, and why did I invest in Portugal in the past years, as a means to take advantage of geographic arbitrage. Today, I’d like to expand a little bit on how awesome it is to live in Portugal, and why so many people decide to take their vacation here.

Quality of life

As I have written before, Portugal is like a small paradise on earth. The quality of life is very good. In the following, I’ll cover the main points.

Food

One of my favorite points. Food is Portugal is crazy awesome, and dirt cheap. As I said before, you can find you restaurants serving you awesome meals just like this one for less than $5:

What I love to do is to order take away. Portions are always generous and I end up making two meals out of one portion. One takeaway portion like this one usually costs about $5:

Groceries are cheap too. I take advantage of many coupons and discounts. However, I can afford to order food to takeaway, as in many cases I end up making two meals out of a single portion. If you want to have a look at the most typical Portuguese dishes and some parts of Lisbon along the away, check this video from Mark Wiens out:

I am sure Mark agrees that I live where you vacation…

Weather and people

The pictures above were taken in February. Can you notice the amount of natural light there is? I ain’t faking it….

People are also extremely open and helpful to you. I wish you could experience this personally, as words can’t convey this accurately. At this point in my life, it is such a great relief to move to a country where most people are nice.

Portugal has also a unique approach to drug usage. In 2001, Portugal decriminalized the usage drugs, allowing every citizen to possess a small amount of drugs. Turns out that this has yielded fantastic results. The number of drug-induced drugs dropped from 80, in 2001, to 16, in 2016. Have a look at these stats: 16 drug-induced deaths in the entire country in one year. Currently, Portugal spends 90% of the available budget for drugs on treatment and 10% on punishment – the opposite of the US. Have a look at this documentary:

My lifestyle

I will be living in Castelo Branco, a small city near Spain, and I will be working in Aveiro.

(taken from Google Maps)

As I took a part time position in the beautiful city of Aveiro, I will afford to drive there every week. The way we decided to structure my working time was to work 2 weeks in the month (every second week). In the other 2 weeks of the month, I will be resting at home, and working on my projects, including From Cents To Retirement. I will be driving from Castelo Branco to Aveiro every other week, arriving on Sunday and leaving on Friday (probably late in the day).

Monthly expenses

I will be staying at a nice hostel in Aveiro. I stroke a deal with them, and I will be paying them $280/mo while I am there. Therefore, I expect the following monthly expenses:

Rent = €260 (about $280), includes utilities;

Food = €250 (about $270)

Health insurance = €40

Gas = €150 (about $160)

Clothing = €50

Entertainment = €25 (about $30)

Others = €100

This means that my monthly expenses will sum up to €875. I will earn €1500 from my part-time job. From my salary, I hope to save at the very least €600 (i.e. 40%) every single month. Ideally, I would spend only €500 a month, thus allowing me to continue to save 70% of my salary, but commuting so often and living in a new city will not allow me to do that. My passive income will be completely reinvested into growing my portfolio, so I can forget about using it as well. I will try to do as much as I can in terms of online income and consultation. This income will be used to 1) grow the blog and 2) continue renovating RP#3 and paying down my mortgage on RP#2. I am definitely refining my strategy, but “the vision needs to be re-iterated, I do that a lot“.

Routine

During this period, I will be following the diet and lifestyle that I have described before (LINK MISSING). I hope to go to the gym 3 times in the week and read as much as possible.

I plan to spend 25% of my time blogging, 50% working on my new job and 25% of my time working on my Real Estate and online businesses.

In 2017, I am also making some treats: 1) I will meditate for at least 5 minutes every single day, but I hope to meditate for 20 minutes on Sundays, 2) after May, I will explore the coast on my own. In particular, I will be taking one Saturday every month to do that. I will run along the sea and capture beautiful images. Is there any better definition of “I live where you vacation”?

How others see Portugal

Here’s this couple of brits talking about the prons and cons of living in Portugal:

I have covered the topic “financial freedom” in detail in my book “My strategy to retire early” but today I want to go over on a few angles of this topic.

What is financial freedom?

For me, financial freedom means that you attain a certain level of wealth that you don’t need to work for money anymore. This can be achieved in various ways. You can win the lottery. You can inherit more money you’ll ever spend. Maybe even sell the company you’ve built from the ground up and get a nice exit. Or you can do what I am doing: save aggressively, invest wisely, and ultimately build a nest egg that pays you enough money to live off.

If you ask people whether they want to be financially free, most will say yes. However, they lose site of this by putting other things first. Most people get themselves into huge debt for a home and a car (not to mention college debt). Others keep using their credit cards to buy stuff they really don’t need, just to have a spike of excitement (I will not even call it happiness) when they buy it.

If you want to achieve financial freedom, you will have to adopt a whole new set of rules for your life and eventually become a different person. And to truly do and embrace that, you’ll have to assess whether this is a true priority in your life. Otherwise, my experience is that it won’t work. Ask yourself questions like “am I OK with living off of 30% of my salary for 10 years?”. Or “am I strong enough to make my own meals and coffee (instead of going out) every day?”. I can’t tell you exactly what it will take for you to become financially free. However, questions like these will give you a good idea of what it really takes.

What is necessary in order to achieve financial freedom?

Piling up money is probably not the best strategy to attain financial freedom. Technically, you can achieve financial freedom if you pile up enough money to live off of, but this is a very hard way to do it. It is simply extremely difficult to pile enough money to live off of, for the rest of your life. To start off, inflation will remove transactional value of your money every single year. The idea is to save and invest, and make more money on your saved and invested money. Think of it as buying your own salary by pieces, if that makes sense. There is one especially popular chart in the ER community that works magically well:

(taken from familymoneyplan.com)

The chart basically represents a trade-off of how much you save and how many years it will take you to retire. For example, if you save 70% of your salary, it will take you about 10 years to retire. Interestingly enough, this works regardless you make 300k or 30k! The key idea is that you can live off a certain amount and you have to build a nest egg that will pay you that amount every year (ideally you want to grow it a little just to be on the safe side). Of course that this means that two people living off of 300k and 30k will have very different annual spending figures.

I like to think about in a slightly different way. To live comfortably well in Portugal, I will need a net “salary” of about €20k/year (as of April 2017). In order to net 20k from my investments, assuming a 8% return rate and 2% inflation, I would need a portfolio of about €333k. Now, let us consider a more conservative return rate, of 6,5%, and 3,5% average inflation. This means that I will net 3% of my portfolio, every year. To get €20k net per year in these conditions, my portfolio would have to be at €670k. This is, in fact, my first goal.

Having children changes things a little bit. If I were to have one child, I would have to increase my living costs by $1000/mo. With a return rate of 6,5%, and a 3,5% inflation rate, I would need a little bit more than one million bucks to net 32k/year.

Why do I want to achieve financial freedom?

If you follow my blog of you have read my book, you know that I want to retire because I have the Chronic fatigue syndrome and sometimes I just drag myself to the office. But even if I were absolutely healthy, I think I would trying to retire as well.

Whether you want to achieve financial freedom is up to you. Look deep inside and find out if you really wanna do that. Even if you already know you want to achieve financial freedom, looking deep down for the actual reasons will give you strength to fight. And boy, this is one heck of a hard road!

How do I imagine my financial freedom?

Just because I plan to retire early it doesn’t mean I will stop working. As I said, what I really want is to be able to do whatever I want, whenever I want. Maybe surprisingly for some, I love to work. In fact, most of my time is spent working on stuff I love. If you didn’t achieve financial freedom yet, you won’t be able to work on what you want. You will have to work for money. This may come in the form of a boss or your own business, but there are many things you must do even when you don’t feel like it. And that is the whole point of financial freedom. Here are some examples of stuff I will do after I achieve financial freedom:

Blogging. I’ve always loved to write, but blogging is a lot more than writing. If we consider the tasks underlying a blog, writing is one of the smallest tasks of a blogger. Content creation involves much more than simply writing. But content creation is not even the bulk of one blogger’s tasks. I want From cents to retirement to become a reference for personal finances and early retirement. In order to turn a blog into a reference, you need to work very hard.

Going into nature way more often. I love to hike (especially in not so popular wood trails), find hidden lakes and waterfalls and what not.

Working out more often. Between 2010 and 2012, I used to workout 3 times a week every week. My shape was amazing. I ended up giving up of that due to lack of time.

Write more books. I wish I had the time to write two books every year.

Give back to the community. I plan to help those in need, especially those with CFS.

Coaching other people. I have a few clients right now (I have a partner who is generous enough to send some clients over), and I coach a few friends. However, I would like to coach and help people on a much more broader scale.

If you liked this post, then I recommend you to check out the resources down below.

The main question I go through with my clients and those I advise is how to save money. If you want to retire early, you must save money. But how? Although this is a simple question, only the right actions will do the trick.

I actually answered this question on Quora in December 2016, which ended up getting almost 100k views. This post is the result of a huge compilation of savings tips and tricks to save money that I’ve been using over the years. You may find that some of these tips don’t work for you. That is fine. Simply try to apply those that do. Without further due, let us get to it…

How to save money: 20 saving tips you can use right away to save money

The first thing you have to do when asking yourself how to save money is what is actually how much is realistic to save. In my case, I make about $2400/mo net, so I decided that I had to save at least $1600/mo. I will not say that each and every one of you can do this. Yet, most of these tips are applicable by almost everyone.

1 – Pay yourself first

Again, to start saving money, you must first define what is reasonable to save. You can certainly live off of 30%, as I do, but you will need to be an avid fan of minimalism. On top of that, you need to have a burning desire to save money. In my own case, I want to retire because I have CFS, which may prevent me from working..

If you figured this out, set up a savings account if you don’t have one yet. Then, simply transfer your savings as soon as your salary clears on your account, every month. I often recommend people to set up automatic transfers because they tend to work way better than manual transfers.

Buy assets on credit and try to aggressively pay it back

What really motivated me to save money was to pay back credit. Going to the bank and paying down my mortgages. Paying off the credit card debt I used to advertise my book “My strategy to retire early“.

Maybe you’re hypersensitive to credit. If that is the case, don’t use it.

Also, when the dividends of my stocks clear, I buy more stocks, so I never get to have the chance to spend the dividends.

Note that I do not advise people to use credit unless they really know what they are doing!

2 – Withdraw money from your account for the entire week

It is much easier to use your card to pay for your expenses, so you tend to spend more that way. If you get cash and use it, you tend to stick to it in a much more powerful way than using your cards. I’ve noticed that this greatly helped me. Now, if we’re not talking about great amounts of money, I actually think you should withdraw money for the entire month. Just try it out and see whether you do better.

3 – Record every single transaction you make

You may think this is contradictory with tip #2. It is not! Although it would be easy to record every transaction if you used your cards, you’d tend to spend more. Cash out and use apps for smartphones. Just google up one, there are plenty. Use the one you like the most. The biggest advantage of doing this is that you realize where you spend your money – and maybe change your spending habits for the better!

What happened with me is that I became so disciplined about spending money that I stopped recording where I spent money, with the same results. However, I do understand the value I gained by having done this!

4 – Shop on a budget

I entitle myself to spend a given amount of dollars at the supermarket. In order to do that, I always write down what I need before actually going there. And most importantly, I stick to whatever is on the list!

I follow pretty much the same diet all year long, I know what I need straight away. Plus, I know the prices I normally buy my groceries at, so I can go to a different supermarket and buy only if the price is lower.

5 – I take advantage of the intrinsic value of my money, by buying in bulk

I usually target high expiration date items, that can come in large containers. Rice is one example. I typically buy the best organic rice at a lower price than the average rice brand. This is only possible because I buy 20-50KGs (about 40-200lbs) at a time. Another example of what I buy in bulk is toothpaste.

I also buy in bulk whenever an occasional sale of a product I already usecomes up. Note that I didn’t say “whenever a sale comes up”. It must be a sale of a product I already use so I know that I am not buying just because it is cheaper than usual (which can, in fact, mean more expensive than the products I usually use).

6 – Avoid big sales and Black Fridays

Right. Take advantage of sales that feature the products you already use and trust but avoid the big ones. Why? Because in big sales like black Friday you are compelled to buy products you don’t really need. The only back Fridays I take advantage of are stock market black Friday. 🙂

7 – Turn off the television and the computer at night

You will save on the electricity bill. You’ll be less exposed to ads that compel viewers to buy stuff they don’t necessary need. I personally got rid of television for good about 8 years ago. Feeling bored? Read great books instead. Go online and learn new skills. Meditate (Affiliate link).

8 – Read on how to save money

Yes, posts like this very same one. But this is not necessary the end of it. Look for more articles. Read books that will help you even further. Browe the internet for more articles. Learn from people who did it successfully in the past.

If you are self-employed, I definitely recommend you to check this and this sources.

9. Practice minimalism: stop buying and start selling

As I am currently in the process of moving to a new home, I wanted to make sure that I start off with the right foot. To accomplish that, I will write down a list of items I want to have in my home and stick to it. In addition, I will use the 1:1 item rule: to bring home another item, I have to get rid of one I already have.

People don’t realize it, but having many things is a lot of stress. Try to keep the minimum. Get rid of what you don’t need, by selling it online or market fleas. You’ll save money and make money. Win-win.

10 – Buy used, not new

I buy a lot of books (btw, as a 10.1 tip, aim for free books whenever you can!). The vast majority of them are used because I get a huge discount and yet, they tend to be in very good condition. Whatever you can buy used instead of new makes you saving money and help the planet.

Books are only one example. Another example would be a car, which I would never buy new. It depreciates too fast on my balance sheet. 🙂

11 – Negociate your mortgage

Having two mortgages myself, and a third one on the way, I feel competent to talk about this. Go to the bank and negotiate your mortgage! I do that every 4-6 months, or sooner if I feel that I have new arguments to negotiate. For instance, if I rent out another of my units, I try to negotiate my mortgage down. In fact, if you think about it, every month that goes by, the more creditworthy you get (assuming you don’t default)!

Your mortgage is probably your number one expense so you must be addressing it if you want to save money! Don’t be afraid of hearing the bank telling you no. That is for granted.

12 – Quit smoking. Please!

I cringe whenever I hear someone telling me they need to save money while they smoke a cigarette. Please, do me and yourself a favor: stop smoking! This is one of the best ways to start saving money because if you’re a smoker you are certainly spending lots of money on cigarettes. And smoking is SO expensive!

On top of that, it will largely benefit your health. Smoking has been shown to cause major problems to your health.

13 – Be a coupon and gift card savvy grinder

This is really for those who master the science of how to save money. So, coupons are a great way to save money. However, as I said in tip #6, you should not buy something just because it is on sale. Same thing with coupons if you’re really looking how to save money. Search for coupons everywhere and use them wisely. Don’t use coupons for products you don’t buy already. Search for coupons by typing the names of the products you already buy. Ask your favorite grocery whether they have coupons.

14 – Don’t change your cell phone

We live in a society which excludes us if we don’t have the latest gadget. Don’t go with that trend. Changing your smartphone every few years is fine, but buying the latest one all the time is certainly not a sustainable idea.

Stick to your gadgets until they don’t work anymore. Remember your excitement (if you were) when you bought them. Remember all the good things you’ve done with them. Change them when they stop working.

15 – Change to LEDs

My father comes from a very humble family. He greatly appreciates what he has right now because his family didn’t even have enough to eat. Yet, he remains super frugal and moderate. He used to float around the house turning lights off and complaining with me and my brother when we were younger. We were not particularly good at turning the lights off, you see. 🙂

Two years ago, I convinced my father to change to LEDs. I knew he was the best guinea pig I had to test whether it worked. It took me one electricity bill to become a devoted fan of LEDs. They truly work, and their price is coming down quickly, as the technology evolves. Do yourself an experiment at your own home!

16 – Pack food for the day

Start saving money is easy if you write down your monthly expenses and address the biggest ones. As I said in tip #11, your mortgage should be addressed first because I am sure it is one of the main expenses you have, if not the biggest! Food comes right after, I am sure. This is especially true if you go out for lunch. Going out for lunch every day of the week for 10 years translates into about $40k, if you spend an average of $15 per lunch.

Seriously, pack your meals. Grab what is left of yesterday’s dinner and take it to work, so you save on lunch. Make a healthy sandwich or salad. Won’t take you much time but will certainly alleviate your wallet!

17 – Downsize

Bigger homes mean more expenses, it is that simple. Downsizing is such a great way to save money! All too often, smaller homes mean also cheaper acquisition costs. If you downsize and you’ve got a mortgage, you’ll pay less for your mortgage. If you paid your home off already, you can take the extra cash and invest it. In general, you’d save on maintenance and utility bills, at the same time you create more income. Win-win!

18 – Write a “how to save money” list

This can be way more effective than it looks like. If you write down the list (and actually read it every now and then) you’ll remember what you should be doing! On the back of the list, write down the prices of your most common groceries. Next time you buy them, you’ll have good comparison terms.

19 – If you do use credit cards, choose those with cash back

This one is pretty self-explanatory. Although it really comes in the first pages of many books on how to save money, not many people do this. Choose credit cards with cash back and benefits, if you really have to use them. A reason to use credit cards is to get lower interest rates on your mortgage, as banks often do that when you get credit cards from them. Use all the benefits of credit cards – call their customer service and have them sending you the entire list of benefits!

20 – Cancel unused memberships and negotiate bank fees

I have made this mistake myself: I went on for a few good months with a club membership I never used. That was $40/mo, so we are not exactly talking about peanuts here. When I first started to think how to save money, this was one of the immediate things I changed. I have no memberships now. I pay for my gym “membership” on a monthly basis (which is 7% more expensive). As I don’t workout in August, it ends up being equally expensive – although I only pay for it if I am really using it!

Bank fees are another major component of how to save money effectively. Have your bank statements scrutinized every month and make sure you have no unknown fees popping up. If you do, question the bank right way – and don’t forget about it!

21 – Refinance high interest debt (to lower rates)

Student loans are so common that if you went to college, chances are you got yourself some debt. In most countries, such as the United States, you can refinance your student loans. Another common high interest debt that people should re-finance is credit card debt. I’ve had clients that payed upwards to 30% interest on their credit cards and found themselves in a very big hole, and one that is hard to get out of. Refinancing and consolidating is key.

To refinance and consolidate high interest debt, I recommend checking out this and this sources.

If you found this post because of music lyrics, an idiom or any other reason, such as a book, this may disappoint you… this post was written because of a much better reason. You see, I want to retire early (in my 30s), and this post is all about early retirement. Get your espresso, chill out and enjoy the post.

Yesterday was Sunday, and Sundays are super special for me. These are the days when I truly experience freedom. I think of Early retirement and financial freedom as a lotta Sundays in a row, actually. 🙂

So here’s what my typical Sunday involves:

A properly cooked breakfast. I typically have a few eggs in the morning, with buttered toast and salad:
(this picture is from a hotel breakfast, but you get the idea).

I meditate for a long while. I typically meditate for about 5 minutes a day, but on Sundays, I extend that to 15-30 minutes, at least.

I try to watch a movie or a TV show episode (I love Shark Tank, for example).

Some of these things are things I can only do on Sundays. It is funny that the expression “my Sunday best” which usually pertains to clothing is now becoming obsolete because fewer people go to the church (I am Christian but I usually don’t go to Church).

From April 1st, I will be starting to follow a variant of the Paleo diet, which I already presented before, and a completely new routine. I will post a truly comprehensive post on that soon, and it will be an aggregation of various “my Sunday best” routines, although with extremely fine instructions on what to eat, what to drink, when to sleep and a lot more.

What do you do to enjoy on Sundays? Let me know in the comments down below.

As you know, I am canceling my contract in Germany in May to move to Portugal for good. There is a ton of reasons to do that, and I’d like to share them with you. In fact, I wanted to do this a long time ago, but a combination of expensive renovation costs for RP#3 and the fear of living without a salary for a while made me put my decision off for a few months. Not it’s settled! I am canceling my contract and moving to Portugal for good.

Hi, I am Benjamin Davis!

I’m 28 years old and I live in Portugal. I hold a PhD and I work as a scientific researcher. Sadly, I developed CFS during my PhD and fearing I could not work much longer, I educated myself financially and started to work towards retiring by 33. Follow my journey on this blog!

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